The Bank of Japan Deputy Governor Ryozo Himino announced that the Bank of Japan (BOJ) will discuss the possibility of a rate hike at its January 23-24 meeting, though he avoided signaling a clear decision. Himino emphasized the need for careful timing in monetary policy adjustments.
“The BOJ will base its decision on updated economic and price projections”, Himino said, adding that inflation trends and economic conditions are progressing as expected, aligning with the BOJ's targets. If this continues, the central bank may raise rates, as it did in March and July of the previous year. Following his comments, Japan's 10-year government bond yield rose to 1.25%, and the 2-year bond yield reached its highest level since 2008 at 0.68%.
Economists remain divided on the timing of a potential hike. While some expect action in January, others believe the BOJ will wait until March, after preliminary results from annual wage negotiations.
Himino highlighted strong corporate profits, labor shortages, and a minimum wage hike as factors supporting robust wage growth. He cited reports suggesting that wage negotiations could yield results similar to last year’s increases. However, small businesses, which employ 70% of Japan’s workforce, face challenges from rising costs and may struggle to match larger firms' pay raises.
Himino also noted the importance of monitoring U.S. policy under President-elect Donald Trump. He expects Trump’s inaugural address to offer insight into the administration’s economic direction, which could influence BOJ decisions.